Succession planning is critical to ensuring your business can continue to thrive when key people leave. A well-thought-out succession plan reduces the risk of significant disruption when you lose senior personnel.
In an increasingly competitive landscape, you need a dedicated strategy to help you identify tomorrow’s leaders, today. Get this right and your business can thrive long-term. Get it wrong and you risk facing workforce disharmony and rising costs.
Without a succession plan, companies can find themselves without adequate management and leadership where it is needed most. Without a clearly defined parameter for succession plans, businesses can either find themselves with gaps among their teams or with the wrong fit. And that’s before you even consider the cost implications for hiring and onboarding, which can easily go into the thousands for each role - a costly error of poor succession planning.
At Thomas International, we use psychometric tools and solutions to help organisations like yours identify natural leadership qualities, understand the effect of personality traits on a team, and gain a 360-degree view of your people development needs. We’ve been doing this since 1981 – and we’ve brought together some of our knowledge to share with you.
This guide will help you understand the rationale for succession planning and how to get it right. We’ll take a look at defining succession planning, how to tailor your planning for internal and external hiring, best practices for finding successors, and top tips for better succession planning.
What is succession planning?
Succession planning processes involve an organisation developing a strategy for onboarding and training staff to ensure if someone leaves the business there is a suitable replacement. This is incredibly important where key roles in senior positions are concerned. It ensures there are no gaps and that key roles are not filled by employees who are unprepared for the requirements.
If we look at the succession planning definition, it highlights the need for businesses to ensure they are continually engaged with their staff and understand the value of high-potential employees within the organisation. By evaluating the needs within the business for key roles, HR succession planning can prime suitable candidates to step into an available position should the need arise.
However, the succession planning meaning delves deeper into the need for ongoing training and development requirements within an organisation. Business succession planning prepares both group structures and hiring teams for changes that may occur with limited notice and ensures they have the resources necessary to plug the gap quickly. The sooner a successor can fill a vacant position, the less disruption is likely to occur within the organisation.
By identifying new leaders to assume roles as they become available, a sense of continuity takes place. The most simple definition of succession planning can be considered replacement planning as capable employees embrace their new role with confidence and proficiency.
Why does a business need succession planning?
All businesses fit the criteria for succession planning. Employee succession plans are there to address changes that occur when employees leave or get promoted. It is smart to have someone who knows the business and the role ready to move up into a position that becomes available. The alternative is a huge gap or someone doing two roles instead of the one they have been promoted into.
Management succession plans also aim to keep hold of your most valuable assets within your organisation. The process aims to attract and retain top talent in your organisation and develop them through well-targeted development efforts. It also increases the availability of experienced employees with the potential to assume certain roles should they become available.
Incorporating succession planning within your business also paves the way to create opportunities that keep current, high-value employees engaged and retains their talent. It’s important to note that succession planning doesn’t only cater to leaders leaving either, it also sets up opportunities for promotion and development within the organisation. All resulting in a stronger, more effective workforce to deliver on the company vision.
Of course, there are risks associated with a lack of succession planning model in place. Poor succession planning examples include failure to create a strategy for identifying and developing internal talent to assume roles when they open, not defining roles correctly to find the most suitable successor and not having adequate resources available for succession and development plans.
What are the key benefits of succession planning?
Organisational succession planning sets a business up for success. Understanding the benefits that arise from an effective succession plan will support HR initiatives to incorporate with their talent management and succession planning model. We’ve highlighted the greatest benefits to businesses that prioritise succession planning within their business model:
- Think of it as business insurance – any top talent can be lured away to another company or can just leave – it is smart to have a plan in place to ensure there are other candidates who can take on that role.
- Identifies future leaders – find the positions that are most critical to the future success of the company and the internal candidates with the values, skills and desire to take on those positions.
- Structure for development and training – by finding potential successors early, you will have time to develop a training and development program to ensure that they have the skills required to take on certain roles, in advance. This will also motivate other employees to work hard, as they will want the opportunity to develop.
- Brand identity – by creating an internal succession plan, you get people from within your business moving up and maintaining the brand identity, the company culture and its core values.
- Cuts recruitment and onboarding costs – by promoting internally, there is less need for onboarding and the high costs of recruitment.
- Increased engagement - employees who know there are growth and opportunity awaiting will receive a self-esteem boost, resulting in a more engaged workforce.
How to develop a succession planning process
Finding the right individuals to lead your organisation is critical to business success and competitiveness. But with the average tenure of a C-suite leader ranging from 3-8 years, effective succession planning can be the difference between continued success or potential failure.
Succession planning isn’t a one-time activity, rather it’s an ongoing process that provides a safeguard in the event of an unexpected departure, a transition plan for a managed handover, and a method for developing a pipeline of leadership talent.
Create a strategy for identifying and developing future leaders at your company – at all levels. Make sure you have plans in place to address the inevitable changes that occur when employees leave – by training high-potential workers for advancement into key roles.
Instilling a succession planning model into your HR function protects your assets within the business and prepares you for the time when key players will inevitably depart. Understanding the value of leadership development and succession planning gives organisations the strength of business continuity with minimal interruption, positioning them for a stronger outcome.
These are the key steps for how to develop a succession planning process for your organisation so you can begin preparing for the future.
1. Identify your future needs
The first step is to make a clear outline of your succession planning aims. Make sure that you look at your entire organisation, your key managers and ways that as a company you can develop crucial talent once they are identified.
Obtain buy-in from essential stakeholders within your organisation from the very beginning. Those involved in the decision-making process will need to be on the same page to ensure the plan is effective and enacted when required.
The most important part of this first step is that you keep the momentum going, do not look into a succession plan and leave it there – it needs to be monitored and to evolve.
2. Identify your key positions, competencies and behaviours
When someone leaves, they take knowledge and expertise with them. In some ways, it’s a good sign that you’ve developed them in the right way. But when it happens, it can leave a gap that takes time to repair.
The leaver is an individual in a very complicated ecosystem, and often, the true significance of their contributions only becomes apparent after the fact. Rather than replacing key people, take a more proactive approach – it’s why succession planning has more recently developed strong links to talent management.
This is the time to identify what is required for fulfilling key roles to ensure the pipeline for talent is constantly available should the need arise. These skills and behaviours should be logged within your succession planning template to create transparency within the model. Evaluate which competencies and skills are essential to the position to ensure promotion or hiring is suitable when the time calls.
3. Select and invite high-potential candidates
Hiring talent and succession planning should be partnered to analyse suitable candidates. This can be valuable if you build your succession plan into your hiring and recruitment process from the beginning, rather than as an add on.
Encourage staff within your organisation to apply for leadership development and succession planning programmes. This promotes an environment where they will avoid feeling forced into a position they may not wish to obtain or may not be appropriate for them.
Career path and succession planning are intrinsically tied. Succession planning isn’t just about reacting to a senior person leaving. It should also be a continuous investment and process that reaps rewards for your existing employees and prospective hires. By outlining the clear path for opportunities that exist within your organisation, you are likely to discover ambitious and suitable applicants that meet your criteria while also increasing employee engagement.
4. Access for high-potential and performance
There are a number of methods you can employ to help you better assess your talent pool. Consider introducing a range of evaluation methods in your succession planning model such as psychometric testing and using indications from performance measures and KPIs.
Choosing the appropriate methods to measure candidate performance will enhance your validity of the organisation’s succession planning template. Succession planning should be viewed as a strategic opportunity rather than an inherent risk to be managed. What’s more, objective, quantifiable metrics are crucial when evaluating the current performance of senior executives and assessing candidates for future succession.
Psychological profiling is becoming increasingly important and provides measurement tools proven to select the right people. Using psychometric profiles and executive competency frameworks can reduce the influence of bias and organisational politics. HR managers will usually be sending these and reading the results to identify employees with high-potential.
Psychometric assessment and interviewing is crucial. Even the most successful individuals have blind spots and characteristics that can derail them. It’s why understanding the behavioural, cognitive, personal, and emotional characteristics of succession candidates can be invaluable.
Ask your senior HR professionals to conduct in-depth competency interviews with potential candidates – both internally and externally. And remember: executive role competencies may have changed substantially since they were conceived, so don’t try to replace the departing individual like-for-like. Your decisions should be based on quantitative and objective measurements that reduce bias and the influence of organisational politics.
5. Select training and development activities
Once suitable candidates have been identified you can begin to recommend personalised development programmes to support their growth.
A big part of succession planning is training and developing high-potential candidates for future roles. By having a clear talent management scheme in place, your employees are more motivated and you can identify key people for key roles early.
Individuals can be prepared for succession opportunities through numerous means, ranging from stretching and experiential projects to formal training programmes. These programmes are designed to support the development of shaping current staff into future leaders as the elected successors within the organisation.
It is important to ensure you are communicating succession planning to employees so they are aware of the opportunities and how to achieve them.
6. Implement a personal development plan
Building a leadership pipeline across your organisation is crucial. Investing in personal development plans for future leaders prepares successors to step into the role when the time arises. Developing internal replacements means you will already be aware of their cultural fit, as well as benefiting from existing relationships and networks within the organisation.
There are a variety of personal development programmes you can implement to support your identified successors including:
These are an opportunity for existing leaders to demonstrate additional capabilities. For example, by developing a new market entry plan, leading a new technology platform roll-out, and expanding their remit across territories.
Academic qualifications aren’t necessarily the best predictors of future success, but formal training can help develop senior leaders. This can range from an academic programme such as an MBA, through to support for chartered status if part of a profession. It not only helps upskill your current leaders but also demonstrates an investment in your people’s future.
An experienced coach can help an individual prepare for the demands of a more senior role, especially if the coach is able to utilise the recipient’s psychological profiles.
Accelerated leadership programmes
A successful senior leader needs to understand and operate across operational, interpersonal, and strategic domains. By measuring and examining senior leadership characteristics and applying the insight into an accelerated leadership programme, you can fast-track those identified as having the potential for senior leadership.
It’s important to ensure you have buy-in from all key stakeholders so there is agreement about the personal development plans in place. These programmes should also be monitored and updated when required to ensure they are still relevant and remain current.
7. Monitor and evaluate
You must review and evaluate the succession plan model and its effectiveness to discover what is working and if any elements of your process need adjustment. To understand whether the succession plan is working as intended organisations must define their criteria for effective leadership as well as whether their training and development programmes and identification of future leaders is suitable.
Given this, how do we define success?
Academic achievement as a measurement of success has taken more of a back seat recently, in favour of using general intelligence and conscientious personality traits as predictors of job success.
The role of emotional intelligence as a critical leadership skill has also received considerable attention over the past few years.
Managing the evaluation and review of your succession planning template can be managed through means of panel reviews or assessment centres. It’s important to note this should remain flexible and appropriate throughout the entire process to ensure it is effective and efficient.
Thomas has a range of psychological tests and assessments which can be used to measure these characteristics:
- Aptitude assessment (GIA) – measures the ability to hold and reason with new information, and solve problems with instructions
- Emotional Intelligence assessment (TEIQue) – helps understand personalities and how best to interact with others to achieve goals
- Workplace Personality assessment (HPTI) – benchmarks against six key traits, analysing approaches to leadership and where there may be room for improvement.
Take time to regularly review your current talent, continually recreating and refocusing the knowledge and skills they need to be effective. Make adjustments where necessary and continue to evaluate as the landscape continues to change.
Internal staff development vs external recruitment
The importance of a solid succession plan is clear: to avoid potential risk caused by business-critical employees exiting the company. The next question is often around whether you should hire a successor externally, or nurture one internally.
That decision will depend on a variety of factors, ranging from the cost of an external hire versus internal, to the time spent with a vacant role, the necessary training, or whether the candidate is the right fit.
The cost of hiring
According to Accounts and Legal, SMEs spend £12,000 on average hiring a new employee.
This of course depends on several factors such as the sector you operate in and the type or seniority of employee you’re looking for. But it does mean that there will always be a cost of bringing in someone fresh to fill a role, whereas a promotion from within your organisation may save you money.
Another factor is the number of people you employ. Companies with fewer than nine employees spend on average £2,902 on recruitment logistics, whereas firms with 250 or more employees can spend over £7,000.
The difference in these costs comes down to the extra expense of using temporary workers or recruitment agencies.
If you have a succession plan in place to nurture a promising employee, then your investment in training and preparation will pay off, downtime will be reduced, and you’ll increase employee loyalty with the prospect of a promotion.
Roles like Financial Director or CEO may require the life experience and acumen of someone outside the industry – making a succession plan invaluable.
Getting the “right fit”
People rarely stay with the same company for their entire career anymore, making employee churn a significant cost. One way to help reduce this is by ensuring prospective hires are the right cultural fit.
For an internal successor who knows your business’s goals, values, employees, and best practices, this isn’t an issue. But for external hires, it’s vital to hire someone who’s not only the right fit for the role, but also the right fit for the business.
This is where behavioural profiling can help. It can give a more in-depth understanding of a prospective employee than an interview alone can provide.
A well-developed psychometric assessment – completed as part of the hiring process – not only gives a broader view of the candidate, their abilities and their personality, but also provides an individual benchmark that can be monitored and assessed as they progress through the talent management programme, and indeed, their career.
It takes time to train the right people…
No matter how perfect your succession plan, you’ll rarely achieve a smooth transition, regardless of where you choose to hire from.
According to a study by the Centre for American Progress (CAP), the average cost to a business between a mission-critical employee leaving – such as a top executive – and their successor being up to speed in their new role can be up to 213% of annual salary.
Getting to optimal productivity will depend on the new employee’s background and the sector they’ve come from. But if they’ve moved firms in the same sector, the time spent on training will be far less significant compared to taking on a recent graduate, for example.
…and that also goes for training internal talent
Preparing internal talent for business-critical positions can still be expensive and time-consuming. Whether you send them on courses or hire an internal trainer, you’ll likely incur significant costs.
And even while a great internal, semi-autonomous training course can have organisation-wide benefits, it’s important to calculate the cost implications and return on investment (ROI) for every option.
Talent management programmes drive business value
Talent management programmes – that are linked to clear business strategies – ensure that the right quality and quantity of people are in place for an organisation’s current and future requirements.
Studies show that businesses with talent management programmes earn 15% higher revenues than competitors. So even though employee development is the first priority, there are clear benefits to the business as well.
Personality profiling gives quantifiable data that can be measured and analysed to assess how an employee progresses through the programme – including how well the programme provides value to employees.
And while talent management programmes develop individuals, no amount of development can make up for a poor fit for a role. It’s why hiring the right person for the right role is vitally important right from the start.
Employee engagement matters
Employee engagement is vital to avoiding churn.
The ability to chart employee progression and gather input and ideas not only means that employees feel valued and involved in your organisation, but you also reap the benefits of unique insight on how your people feel.
Good employee engagement can also mitigate the impacts of an ageing workforce, particularly those in more senior roles. Involving both older and younger employees in succession planning conversations can help them to have a greater appreciation of the bigger picture.
Thomas Engage can help you establish levels of engagement within your organisation and identify strategies and initiatives to enhance employee wellbeing, motivation and productivity.
There’s no “right way” to approach recruitment
The fact is, employees who feel nurtured are more likely to be loyal and engaged. So, it’s vital your succession plan has an emphasis on training to help your most promising employees move to more senior positions.
At the same time, it’s always a good idea to have a plan of action to externally recruit a candidate for business-critical roles – especially important if you struggle to identify an appropriate internal candidate.
Every job role and situation is different, so while there’s no one-size-fits-all approach to hiring, there are important factors to consider before you make the decision to hire internally or externally.
When to internally recruit:
- Promising employees already exist in the company who could do the job
- Plenty of notice has been given by the outgoing employee
- Your company is thriving, and you have the capacity for people to move roles
- You have an abundance of skills and experience
- Minimal on-boarding and training is required
When to externally recruit:
- You already have a great candidate in mind who can quickly fill the role
- You have a tight deadline to fill the position
- When the stability of the internal structure is delicate and shifting employees may cause trouble
- There isn’t a strong succession plan in place yet, and time constraints make it difficult to create one quickly
- The required skills and experience aren’t available
- You want a fresh perspective in the role
- You have a good training plan in place to onboard the new hire
Succession planning is vital to business success. It recognises the value of key roles within the business functions, the importance of knowledge and skills within your talent pool, and prepares you for the time when staff will inevitably depart at one time or another.
Succession plans prevent organisations being caught unaware with a well-crafted model in place to quickly and effectively fill a position. It reduces recruitment and onboarding costs and protects your business by ensuring there is a clear line of action for filling crucial leadership and management roles within your company.
The implications of the absence of succession planning can result in declined business efficacy and long-term detriment to achieving company objectives. It can leave you with gaps in knowledge, expertise and talent that detracts from the brand experience. Understanding the importance and significance of succession plans within your organisation can save you from the discomfort which the side effects of staff absences leave.
Succession planning won’t look this way forever. But if you take a proactive approach to make sure you can replace vital knowledge and skills when someone leaves your organisation, your business stands to gain a real advantage.
At Thomas International, we use scientifically proven processes to help organisations like yours tackle the challenges of succession planning – both today and tomorrow.
To see how we can help you be prepared for key people leaving or if you have any questions that aren’t covered here, get in touch with one of our experts.